Expert: Economy to grow at slower pace in 2Q

The GDP for the year may be lower than in 2018

by SHAHEERA AZNAM SHAH/ pic by MUHD AMIN NAHARUL

MALAYSIA’S economy is anticipated to grow at a slower pace amid heightened global risks and stabilising domestic financial markets, according to an expert.

In its 2018 Annual Report, Bank Negara Malaysia estimated that the country’s GDP was expected to expand between 4.3% and 4.8% in 2019 compared to the government’s projection of 4.9%, while the World Bank lowered its forecast to 4.6% recently, reflecting the unresolved trade tension.

Malaysian Institute of Economic Research chairman Tan Sri Kamal Salih (picture) said the country’s economy may not be “out of the woods” just yet, despite registering a significant growth in 2017.

“The private sector has predicted from their business activities that the second quarter (2Q) will be slower than what this year had started with.

“Altogether, the GDP for the year may be lower than in 2018. In fact, 2Q will be lower than the performance in the first three months,” he told The Malaysian Reserve in an interview recently.

However, the swings in the US and China’s stances following their trade negotiation would likely result in a slight uptake for Malaysia’s economy which could be seen in 3Q this year.

“We will still be suffering. But, concerning the US-China trade dispute, there is a new development, a ceasefire, that is in fact a positive development especially on our manufacturing exports.

“We see that as a positive development and we might be able to see a bit of an uptake in 3Q results,” he said.

Kamal said the trade truce between the two economic giants that took place at the Group of 20 (G-20) summit in Osaka lately set the tone on the directions of various issues involving telecommunications firm Huawei and the US agricultural crops.

This, in turn, is benefitting Malaysia.

“At the moment, we are considering what had transpired at the G-20. There is a US-China trade ceasefire, allowing the US companies to trade with Huawei again.

“On top of that, China is agreeing to import more agricultural crops from the US. But, with that being said, it does not mean overall, we would be doing better than last year,” he said.

“From the beginning of the year, the domestic and private consumptions have been sustaining us to this current growth, but Malaysians are already burdened by the cost of living.

“The fact is the government is still burdened by debt overhang. Although there is some restructuring to settle it, it would take another one to two years to resolve,” he said.

For the first three months, the country’s economy grew at a slower pace of 4.5% than 4.7% posted in 4Q of 2018, dragged down by weaker trade and investment.

Malaysia’s export activities contracted in February and March with quarterly growth of 0.1%, contributed by trade tension between the US and China.

However, in May, exports rose by 2.5% to RM84.15 billion from the same month last year, aided by an increase in crude palm oil exports.

In contrast, imports expanded at a softer pace of 1.4% year-on-year, making the trade surplus to widen to RM9.1 billion in May.

In May, the central bank reduced the Overnight Policy Rate by 25 basis points to 3%, mainly due to the downside risk to growth as a result of the unresolved US-China trade tensions and moderating global growth.

Malaysia’s inflation, measured by the consumer price index, rose at a slower pace in May to 0.2%, driven by the costlier price in the food.